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Nam Tai Electronics Inc. Stock Downgraded (NTE)

NEW YORK (TheStreet) -- Nam Tai Electronics (NYSE:NTE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.

Highlights from the ratings report include:

  • Net operating cash flow has decreased to $10.67 million or 31.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for NAM TAI ELECTRONIC is currently extremely low, coming in at 11.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.20% trails that of the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • NTE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.62, which clearly demonstrates the ability to cover short-term cash needs.
  • NTE's very impressive revenue growth greatly exceeded the industry average of 45.0%. Since the same quarter one year prior, revenues leaped by 77.6%. Growth in the company's revenue appears to have helped boost the earnings per share.

Nam Tai Electronics, Inc. provides electronics manufacturing and design services to the original equipment manufacturers of telecommunication and consumer electronic products. The company has a P/E ratio of 19.3, equal to the average electronics industry P/E ratio and above the S&P 500 P/E ratio of 16.2. Nam Tai has a market cap of $285 million and is part of the technology sector and electronics industry. Shares are down 1.4% year to date as of the close of trading on Wednesday.

You can view the full Nam Tai Ratings Report or get investment ideas from our investment research center.

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